NSW:Power assets of dubious value: auditor

The NSW government will not delay the sale of state-owned electricity assets despite uncertainty about their value and opposition claims that bad timing could result in billion-dollar losses.

The state government is in the final stages of negotiations to sell the assets, including the retail arms of energy corporations EnergyAustralia, Integral Energy and Country Energy.

Seven power-station development sites and electricity trading rights for nine state-owned power stations are also up for grabs.

The deadline for bids is mid-November, with the deals expected to be finalised in early 2011.

However, a new report from NSW Auditor-General Peter Achterstraat reveals significant uncertainty about the value of the power-station sales, because of a potential future introduction by the federal government of a carbon pollution reduction scheme (CPRS).

The federal government said in April the CPRS scheme’s start would be delayed until there was greater clarity on the intentions of countries such as China, the US and India but did not rule it out.

“I did note significant uncertainty that may affect the value of power-station assets due to the unknown impacts of any future carbon pollution reduction scheme and the government’s proposed electricity industry reforms," Mr Achterstraat said in a statement on Wednesday.

“Privatising the NSW electricity industry has been ongoing for 12 years and continues to present challenges to government," he said.

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Asked at a media conference on Wednesday if it would be prudent to delay the sale until after the CPRS issue was resolved, NSW Premier Kristina Keneally said: “No, we don’t see that as necessary."

State Treasurer Eric Roozendaal told the media conference there had been “strong appetite" for the assets, but would not comment on the value of the transactions.

The CPRS issue was well canvassed and everyone “understood the risks involved", Mr Roozendaal told reporters.

The state government was under pressure to delay the sale, with the opposition saying that selling the assets now would result in billions of dollars being lost.

“The people of NSW are likely to lose billions of dollars, never to be had again on the back of this sale," opposition treasury spokesman Mike Baird told reporters in Sydney.

“The auditor-general has very rightly identified the big problems in relation to the complexity of this transaction, which ultimately results in a reduced price.

“It also raises concerns about the timing of this sale.

“Selling these assets at this time in this form is not in the interests of the people of NSW."

Mr Achterstraat’s audit report also revealed a big increase in profits for the state’s seven electricity corporations. Their combined after-tax profit was $1.2 billion for the 12 months to June 30, up from $847 million in the 2008-09 financial year.

The seven corporations comprise three generators, one transmission company and three distribution and retail divisions. Their combined profits resulted in a 29 per cent rise in distributions paid to the government to $1.37 billion in 2009-10 compared with the previous financial year.

Meanwhile, there are fears taxpayers could be locked in to a $1 billion coal subsidy plan if the companies buying the assets are offered discounted coal from the publicly-owned Cobbora mine in central NSW.

There is unconfirmed speculation they could be offered coal at about $35 a tonne, down from long-term domestic prices of $60 a tonne.